Insights 
VT 
In the third quarter, New Zealand’s Labour Cost Index showed a rise of 0.5%, exceeding the anticipated 0.4%. This suggests an increase in labour expenses for the country, which may indicate underlying changes in the labour market dynamics.
The USD/JPY has fallen to nearly 153.50 due to concerns about a potential US government shutdown. Meanwhile, New Zealand’s unemployment rate has reached a nine-year high, causing the NZD/USD to drop below 0.5650.
Currency Market Declines
The GBP/USD currency pair has plunged, marking a more than 0.9% loss in a single day, continuing its downward trend for multiple weeks. This decline reflects ongoing market responses to currency valuation and trading pressures.
Gold prices have eased to lows around $3,930 per troy ounce as the US Dollar strengthens. Pressure on the gold market might be influenced by reduced expectations for the Federal Reserve to cut rates in December, despite lower US Treasury rates offering some relief.
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We are seeing a powerful surge in the US Dollar, with the Dollar Index (DXY) recently breaking through the 108 level for the first time since late 2023. This strength is being driven by markets pricing out a December Fed rate cut, especially as the latest core PCE inflation figure remains stubbornly above 3%. The current environment makes long-dollar positions against weaker currencies the most straightforward play.
New Zealand’s Economic Signal
New Zealand presents a clear signal for bearish positions on the Kiwi dollar. The unemployment rate hitting a nine-year high of 5.2% is a major recessionary flag that overshadows the slightly higher wage inflation. This stagflationary mix puts the Reserve Bank of New Zealand in a bind, making further rate hikes to support the currency highly unlikely.
Given the sharp break below the 0.5650 level in NZD/USD, we believe buying put options is a prudent strategy to capitalize on further declines. This allows traders to define their risk while targeting a move towards the lows we last saw during the market turmoil of 2022. Volatility is likely to remain high, making options an effective tool.
The British Pound continues its freefall, and we see no immediate catalyst for a reversal. With GBP/USD slicing through 1.3100, momentum is clearly to the downside as the pair heads for its third consecutive weekly loss. The Bank of England’s recent neutral stance, citing weak domestic growth figures, provides little support against the dollar’s dominance.
The pullback in Gold toward $3,930 is a direct consequence of the dollar’s rally, a classic inverse correlation we’ve seen play out many times. Even though the price has nearly doubled from the levels of 2023, the dollar’s yield advantage is currently outweighing gold’s safe-haven appeal. We would consider call options only if the dollar shows signs of a significant reversal, perhaps triggered by the US government shutdown concerns.
The situation with USD/JPY near 153.50 is more complex than other pairs, presenting a two-way risk. While a strong dollar provides upward pressure, the Bank of Japan’s hawkish chatter and the growing risk of a US government shutdown could spark a flight to safety, strengthening the yen. Traders should consider volatility plays, like straddles, rather than taking a strong directional bet here until the path becomes clearer.
